Crunch Time for FedEx and UPS as Last-Minute Holiday Shipping Ramps Up

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FedEx and the Holiday Shipping Rush

FedEx and the Holiday Shipping Rush

CreditAndrea Morales for The New York Times

MEMPHIS — Donner Pass, the icy stretch of road that cuts through the Sierra Nevada mountains, is 2,000 miles away from FedEx’s world hub in Memphis.

But as the holiday delivery season hits its peak, dispatchers here are keeping an eagle eye on weather conditions along the pass: Any trouble could make it impenetrable for the carrier’s trucks, closing a crucial route out of California.

This year, FedEx says it has strengthened its contingency planning, after shippers were summarily slammed for delivery delays last holiday season. Those contingency plans sprang into action this month, when heavy rains drenched portions of California.

“It’s like a game of chess, where the chess pieces are the airplanes and trucks,” Mr. Tronsor said in FedEx’s control center, called the war room, waving one hand over a digital map teeming with flashing airplane icons and sweeping weather fronts. “The power lies in being able to adjust, in real time, minute by minute.”

FedEx, together with its bigger rival, United Parcel Service, is gearing up to avoid the chaos of last year, when a late surge in shipments and bad weather overtaxed carriers and left many homes missing timely gifts. (Some analysts have also questioned whether carriers and big retailers underestimated consumers’ increasing use of online shopping for last-minute presents.)

Both carriers have hired more workers for the year’s end. UPS announced that it was hiring up to 95,000 seasonal workers, more than twice the number it employed last year. FedEx said it had hired 50,000 workers for the holidays.

And both say they have invested heavily in infrastructure. UPS said it spent $500 million on upgrades ahead of the holiday season, including prefabricated mobile delivery villages that expand existing shipping centers. And FedEx said it spent almost $2 billion on newer, more fuel-efficient planes and other upgrades to its air cargo network, in addition to almost $2.5 billion it dedicated to ground shipping over the last five years.

“I think everyone’s trying to learn from the last holiday season,” said Kevon Hills, an analyst at StellaService, a data company that tracks online retail shipments. FedEx and UPS have both made improvements this year, he said, “and this season they’re pretty much neck-and-neck.”

Still, the carriers face a challenge. Thanks to surging e-commerce, they expect to handle more parcels than ever this year: FedEx says it is preparing to handle about 290 million shipments between Black Friday and Christmas Eve, almost 9 percent more than last year, while UPS expects to deliver 585 million packages in December alone, 11 percent more than last year.

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The FedEx hub in Memphis on Dec. 11. FedEx hired 50,000 workers for the holiday rush.Credit
Andrea Morales for The New York Times

And more retailers, eager to squeeze as much from the year-end holiday season as possible, are pushing delivery cutoff dates later into the season. For example, Pottery Barn has moved its cutoff date for Christmas gift deliveries to Monday, two days later than last year. That is despite delays with some holiday shipments last year.

Other retailers, like Target and Walmart, are trying to relieve the pressure on their deliveries by getting more people to order online and to pick up their gifts in the stores. This year, Target is also offering a “ship-from-store” service, turning back rooms at 136 locations across the country into local distribution centers that the retailer says will allow for faster shipping than from Target.com.

But over all, “retailers are all trying to get the extra sales” with last-minute deals, said Satish Jindel, president of ShipMatrix, which tracks and analyzes retail shipments. “The problem is that some retailers make delivery promises but fail to realize the toll that puts on carriers.”

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For UPS, one solution has been to introduce 15 temporary aluminum-walled “mobile delivery villages” across the country that expand sorting centers and will let up to 90 additional trucks load and unload packages. The company also pressed retailers early for forecasts. Its volume forecasting for this holiday season began as soon as its handlers got through last year’s chaos, a spokesman, Andy McGowan, said.

“It’s all about smoothing out the seasonal spike,” he said.

For FedEx, building both extra capacity and flexibility has been critical. The carrier, for example, now sends two empty cargo planes to fly across wide portions of the country, ready to head to any air hub hit with an unexpectedly large volume of shipments.

This year, FedEx introduced a scanner that examines all six sides of a package at once, helping its sorting centers sift through packages more quickly and accurately. The company estimates that its systems now take less than half a second to classify a package and send it on automated conveyor belts toward its destination, and a package takes about two minutes to travel through a sorting facility, from unload to reload.

FedEx’s Express service is accepting Christmas shipments through Dec. 23. The courier’s heavy investment has turned Memphis International Airport, just minutes from Elvis’s Graceland estate, into the world’s busiest air cargo hub after dark. Each night, as the final commercial passengers stream through the airport’s terminals, FedEx jets start roaring onto the tarmac. From about 10:30 p.m. to daybreak, about 160 planes land and take off, shuttling 1.8 million packages in and out of the hub through 42 miles of conveyor belts.

Both a friend and foe for UPS and FedEx is Amazon, which is progressively upending how consumers shop during the holiday season. Amazon has been investing heavily in its warehouses, and it unveiled an army of squat robots called Kiva this summer to prepare goods for delivery.

The online retailer, the world’s largest, is building its own sorting centers to speed deliveries, and it also introduced a one-hour delivery service in New York, steps that could eventually make Amazon a competitor to FedEx and UPS. But for now, Amazon still remains a major customer for UPS, FedEx and the United States Postal Service for its standard deliveries. Last year, Amazon reached a deal with the Postal Service to offer Sunday shipping throughout the holiday season.

At the U.S.P.S., the solution is simply more work. For the first time, it is delivering packages seven days a week in major cities from mid-November through Christmas Day. The Postal Service is also expecting double-digit growth this year: more than 470 million packages between Thanksgiving and Christmas Eve, up 12 percent from last year.

And for the first time, post offices mailed notices laying down the holiday shipping cutoff dates to every residential address in the United States. The cutoff, for its Priority Mail Express service, is Tuesday, Dec. 23.

“Hurricanes, storms, we’ll be out there trying to get your mail delivered,” said Katina Fields, a spokeswoman for the post office. “But they just have to be mailed by those dates. Or else your loved ones aren’t going to get them for Christmas.”

Correction: December 25, 2014

Because of editing error, an article on Monday about efforts by shipping companies to meet demand of last-minute holiday shopping referred incorrectly to plans by the online retailer Amazon to use Kiva robots in its warehouses to prepare goods for delivery. The company began a big push this summer to use the robots; it will not unveil the effort next summer.

A version of this article appears in print on December 22, 2014, on Page B1 of the New York edition with the headline: Crunch Time for Shippers. Order Reprints|Today's Paper|Subscribe